Reply to Tell me how much you have saved in your 401K at age 40.

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[quote=Anonymous][quote=Anonymous]
You should still max out for the tax benefit.  It's some of the only tax free money you can earn.  Every penny you don't contribute to max out is being taxed.  [/quote]

It is not tax-free, it is tax-deferred. So the issue is your present tax bracket vs. future at the time of withdrawal. 
Whether that benefits you depends on a combination of three factors:
1. Present tax law. vs. future tax law at the time of withdrawal
2. Your present state jurisdiction vs future tax bracket at the time of withdrawal
3. Your present income vs. future income at the time of withdrawal

How those factors play out in concert somewhat depends on you (factors 2 and 3), but the key factor 1 is mostly out of your control. 
For many people, the income in retirement may exceed that early in life (esp. considering the child deductions and exemptions)&gt;
Then the Factor 3 would work against pre-tax savings. 
The factor 2 may work both ways. If I earn in MA or CA (high state tax bracket) but intend to retire in FL - yes, for pre-tax savings
If I earn in WA (no state tax) but intend to retire in CA (say for family reasons), the other way around.
Most importantly, I would project that (with the current US budget situation) the taxes in 10 - 20 years are bound to go up rather than down.
Then you are better paying now and having funds after-tax.

The black swan is the security of 401(K) balances as such in the current and projected budget situation - learn what happened in Argentina.
You think that can't in USA. Well, with our politics now increasingly resembling South America, I am not so sure.
That in principle applies to both pre- and after-tax, although more likely to pre-tax as those are easier to confiscate 
quasi-legally through changes in tax law.

The combination of all these factors are hard to handicap 30 years into the future.
So I am splitting 401(K) about 50/50 between pre- and after-tax, but putting into real estate more than both.
The history (of South America, but not only) shows that throwing someone out of a home/homes is MUCH harder politically and practically
than taking money in some account (sure, the first happened too but usually only for few extremely wealthy &quot;latifundistas&quot;).
That historical memory is, btw, why immigrants to USA (esp. Asians and South Americans) are so focused on RE rather than financial instruments.    
[/quote]

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